MBB - NIM, bad debt metrics improve significantly QoQ

MBB released its consolidated results for H1 2024 with PBT of VND13.4tn (USD529mn; +5% YoY), completing 46% of our full-year forecast. This implies Q2 2024 PBT of VND7.6tn (+32% QoQ; +23% YoY). Overall, MBB’s results were broadly in line with our forecast with QoQ improvement in NIM, asset quality, and ongoing strong NOII. We see no major risk to our earnings forecast, pending a more extensive review.

H1 2024 consolidated credit growth was 9.4%, which was derived from (1) loan growth of 10.3% and (2) a 4.0% decrease in MBB’s corporate bond balance vs Q4 2023. As of Q2 2024, corporate bonds accounted for 5.2% of MBB’s total credit exposure (vs 9.2% as of Q4 2022). Additionally, lending to real estate businesses accounted for 6.7% of MBB’s total loan book (vs 7.1% in 2023).
H1 2024 customer deposits growth was 9.0%. Q2 2024 CASA ratio was 38.6% (+2.0 ppts QoQ; +1.6 ppts YoY), which is by far the highest level in our coverage. MBB currently serves 28 million customers (+40% vs end-2022) and it targets 30 million customers by the end of 2024.
H1 2024 NIM of 4.17% (-118 bps YoY) was lower than our full-year forecast of 4.33%. However, Q2 2024 NIM improved significantly by 54 bps to 4.58% due to (1) a 12-bp QoQ increase in the IEA yield and (2) a 46-bp QoQ decrease in funding costs. We attribute the improvement in the IEA yield to (1) easing NPL formation and supporting lending rates for customers, and (2) strong recovery from written-off bad debts. Additionally, MBB’s decrease in funding costs was mostly due to ongoing CASA improvement and rolling old customer deposits to lower yields.
H1 2024 NOII was VND6.6tn (+73% YoY), completing 61% of our full-year forecast and tracking well ahead of our expectation, supported by (1) strong fee income, (2) higher-than-expected gains from trading FX and investment securities, and (3) strong recovery from written-off bad debts (+67% YoY).
In H1 2024, the consolidated CIR of 30.6% was higher than our full-year forecast of 29.5%. At MBB’s recent AGM, management targeted to control the CIR below 30%.
Bad debt metrics improved significantly QoQ given the resolved NPL case of a big corporate client in June. The Q2 2024 NPL ratio and Group 2 loans levels were 1.64% (-85 bps QoQ; +19 bps YoY) and 1.84% (-46 bps QoQ; -176 bps YoY), respectively.
H1 2024 provision expenses surged 54% YoY from a low base and tracked slightly ahead of our expectations. We note that MBB was one of the few banks that reported a YoY decrease in 2023 provision expenses. However, Q2 2024 provision expenses decreased 26% QoQ, which we believe was partly due to a provision reversal for the major CIC-related NPL case solved in June. Q2 2024 LLR was 101.7% (+ 21.7 ppts QoQ; -54.4 ppts YoY).

MBB’s consolidated H1 2024 results

VND bn	H1 2023	H1 2024	YoY	Q2 2023	Q2 2024	YoY
NII	19,709	19,593	-0.6%	9,481	10,531	11.1%
Non-interest income	3,782	6,553	73.3%	2,079	3,598	73.0%
OPEX	(7,703)	(8,005)	3.9%	(4,135)	(4,491)	8.6%
PPOP	15,787	18,141	14.9%	7,426	9,639	29.8%
Provision expenses	(3,052)	(4,713)	54.4%	(1,203)	(2,006)	66.8%
NPAT-MI	9,917	10,559	6.5%	4,893	6,027	23.2%

Loan growth**	12.5%	10.3%	-2.2 ppts	7.6%	9.5%	1.9 ppts
Deposit growth**	7.2%	9.0%	1.8 ppts	5.1%	10.7%	5.6 ppts

NIM	5.35%	4.17%	-118 bps	5.04%	4.58%	-46 bps
Interest-earning asset yield	9.26%	7.23%	-203 bps	9.27%	7.38%	-189 bps
Cost of funds	4.61%	3.46%	-115 bps	4.85%	3.27%	-159 bps
CASA ratio*	37.1%	38.6%	1.6 ppts	37.1%	38.6%	1.6 ppts
CASA ratio plus term deposits in FX	38.3%	39.9%	1.6 ppts	38.3%	39.9%	1.6 ppts
CIR	32.8%	30.6%	-2.2 ppts	35.8%	31.8%	-4.0 ppts

NPLs / Gross loans	1.44%	1.64%	19 bps	1.44%	1.64%	19 bps
Group 2 loans / Gross loans	3.59%	1.84%	-176 bps	3.59%	1.84%	-176 bps
Accrued interest / IEAs	1.21%	0.87%	-34 bps	1.21%	0.87%	-34 bps

Source: MBB, Vietcap — *CASA volume included demand deposits and margin deposits; ** Q2 2023 and Q2 2024 loan and deposit growth is QoQ growth; H1 2023 and H1 2024 loan and deposit growth is 6M growth.